Shadow chancellor Mr Osborne sparked a furious political row when he announced that he would reverse the 1p increase in NI contributions – set for April next year – for those on incomes under £45,000.

Advertisement

Advertisement

Labour and the Liberal Democrats argued that it was not credible for the Tories to claim they could fund the move through £6 billion of public sector efficiency savings while at the same time arguing that would cut the deficit faster than the Government was planning.

However, in their letter, the business leaders warned that raising NI contributions next year could set back the fragile economic recovery at a crucial time and said: “The Government’s proposal to increase national insurance, essentially placing an additional tax on jobs, comes at exactly the wrong time in the economic cycle.”

They insisted that it should be possible to find the efficiency savings needed to pay for the move, pointing out that while the private sector had improved productivity by 20% in recent years, in the public sector it had fallen by 3%.

“The state must look to enable our public servants to make savings. This can be done by removing the blizzard of irrelevant objectives, restrictive working practices, arcane procurement rules and Whitehall interference,” they said. “As taxpayers, we would welcome more efficiency in Government. As businessmen we know that stopping the national insurance rise will protect jobs and support the recovery.”

The publication of the letter comes as Labour was set to renew its attack on the Tories’ spending plans at a news conference with Chancellor Alistair Darling and Business Secretary Lord Mandelson.